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Arroyo Says Market Competition
Will Continue to Guide Peso Rate

By

Amethyst Ma and

Cris Larano Dow Jones Newswires

Updated Feb. 21, 2001 3:35 a.m. ET

MANILA, Philippines -- President Gloria Macapagal Arroyo said Wednesday the government will maintain a competitive foreign exchange rate to safeguard the country's export sector, a major driver of the economy.

In a dialogue with large Philippine business groups, Ms. Arroyo said the government will allow free market forces to determine the Philippine peso exchange rate against the U.S. dollar.

The peso has regained around 17% of its value against the dollar, after it hit a record low 55.75 pesos to the dollar Jan. 17, since the resolution of the country's leadership crisis.

"We could improve it [exchange rate] even more, but we won't because the export sector will suffer," Ms. Arroyo told businessmen. "So, it is where it is in order to keep your export competitiveness," she added.

Along with agriculture, exports had provided the boost that kept the Philippine economy growing in the aftermath of the Asian financial crisis. Exports grew last year by 8.7% to $38.08 billion, and are expected to grow at a pace under 8% this year, due to an expected slowdown in the U.S. economy.

Ms. Arroyo, who Wednesday started her second month as president, reiterated her pledge to provide a level playing field for investments and ensure fiscal prudence to keep interest rates and the cost of doing business low.

In its worst-case scenario, the government had projected the budget deficit widening to 225 billion pesos ($4.68 billion) this year. Ms. Arroyo assured the budget gap is capped at 145 billion pesos.

In exchange, the president said she expects businessmen to do their share in creating more jobs to help lower poverty. "We will work hard so that we can beat our deadline of achieving economic recovery and growth for greatest number of our people," Ms. Arroyo said.

"But we can only set the policy framework and the environment. It is you, the business community, who will create the wealth. It is you who will produce," she added.

Ms. Arroyo's rise to the presidency after the Jan. 20 ouster of Joseph Estrada by a military-backed popular revolt had renewed investor confidence in the Philippines, helping both the peso and stock markets rebound. "Our prospects are better now," said Ms. Arroyo as she urged businessmen to resume investments plans stalled by the political crisis.

Donald Dee, president of Employers confederation of the Philippines, said local business groups share Ms. Arroyo's optimism and have now started the groundwork for new investments. "We are very optimistic to do business now. We believe that this administration is fair and transparent," he said.

Arroyo Says Market Competition
Will Continue to Guide Peso Rate

MANILA, Philippines -- President Gloria Macapagal Arroyo said Wednesday the government will maintain a competitive foreign exchange rate to safeguard the country's export sector, a major driver of the economy.